Hospitality and leisure businesses are facing a perfect storm as soaring energy bills, staff shortages and inflation bite. A report in City AM notes that industry leaders have sought urgent Government support to keep businesses open over the winter and avoid significant job losses or closures.
These businesses have had a torrid few years, with the financial impact of the COVID-19 and staff shortages, to which Brexit has undoubtedly contributed. Those staff shortages have meant that many businesses unable to operate at full capacity, and facing spiralling energy costs without the ability to generate the full amount of profit from their premises. At the same time, many consumers are increasingly reluctant to spend money on eating out, as the cost of living crisis bites. So what can hospitality businesses do to control costs and minimise the risk of closure?
Businesses may need to consider altering their opening hours or even opening days so that they can reduce energy usage and costs while maximising footfall while they are open. If this will require contractual changes, consultation with staff will be required before the change is implemented (and in some cases collective consultation will be necessary). Employers should factor in this lead-in time when doing their financial modelling for the coming months. However, cutting pay and benefits as a cost-saving measure may be counter-productive for businesses already struggling to recruit enough staff - particularly if there is a COVID winter wave with the predictable impact on absence levels.
In some cases businesses will have no option but to consider redundancies, but they will need to consider the time required, including in some cases to collectively consult and notify the Government on proposals, and how making these payments would affect their cashflow: it's worth remembering that the upfront costs of doing so can be substantial, with the need to pay notice, accrued annual leave and statutory redundancy payments. It may be preferable to get staff to work out their notice rather than paying them in lieu of notice. Employers can also reduce the costs of accrued holiday by notifying staff that they must take annual leave during their notice periods (although they must give notice twice as long as the period of holiday to be taken). Businesses will also need to consider the knock-on effects on operations of making redundancies - if it will impact their ability to operate at full capacity, that may impact on profitability.
There are no easy answers for businesses in this sector at present. With stories of closures already starting to hit the press, the sector must hope that its pleas for Government assistance won't fall on deaf ears.